How Your Company Can Benefit From ASC 606
In a previous post, we discussed how the ASC 606 standard can affect businesses and what you need to do to prepare. At the face value, it might sound like adopting the ASC 606 standard is all doom and gloom. But, looking at the changes keenly, there are some opportunities businesses can leverage. Here is a quick look at the benefits associated with the new revenue recognition guidelines that any business should take advantage of:
1. Comprehensive data collection for better decision making
In order to comply with new revenue recognition guidelines, companies must make sure that the right data is captured in their systems. According to the ASC 606 standard, every transaction on a customer and associated commissions to sales reps must be anchored on a single contract.
While capturing this data may be an upheaval task, it enables businesses to keep comprehensive and accurate information about their clients. With the right systems in place, it’s easy to extract and share this information with top management for critical decision making with regard to sales strategies and overall performance of the businesses.
Now, this is something that’s not easy to achieve if a company still uses manual systems to manage sales commissions and financial reports. Think about it, manual processes are prone to errors and may not produce reliable reports for quality decision making. Another reason is that the sheer volume of data that needs to be processed under the new ASC 606 can cause serious delays or be extremely expensive if handled manually.
2. Building stakeholder trust through transparency
With the ASC 606 regulations, businesses will not only report the expected revenue from debtors but also the financial state of the companies. This means that any misrepresentation of facts can have dire consequences on the reputation of a company.
On the other hand, when information is accurately captured and shared in a timely and transparent manner, it builds trust with stakeholders and the general public. Consequently, it will be easier for companies to retain employees for longer. This is because they are assured of employment especially if the business is doing well. With low attrition levels, businesses will save more on training and on recruitment cost. It will also be easy for investors to know which firms are worth investing in with minimal risks.
3. Encourages automation of commissions payments
It’s no secret that the ASC 606 standard comes with a lot of information to process. Therefore, in order to keep up with these new requirements, businesses will have to invest in efficient systems that can eliminate manual processes in accounting systems. One way of achieving this is integrating your commission management software with your main financial system. This means that any changes in customers’ contracts will automatically update sales reps’ commissions where applicable. Such changes have immense benefits in delivering both timely and accurate compensation for your Salesforce.
With the deadline to comply with the ASC 606 revenue recognition standard fast approaching, it helps to know how you stand to benefit as a business owner. For instance, maintaining all customer transactions under a single contract means comprehensive data collection for better decision making. Moreover, with the integration of core financial and commission compensation systems, sales reps’ payments are likely to be accurate and timely. These new guidelines, also, foster transparency among entrepreneurs and build stakeholder trust by accurate reporting of the state of business financials and accounts payable.